If you’re a Virtual Assistant who needs help deciding on a hourly vs. package pricing structure, you’ve come to the right place. Here are the two questions I’m going to be answering today:
What’s the difference between hourly pricing, package pricing, and project pricing? Which one should I be using?
I’ll start by saying this: You are allowed to choose what pricing structure works best for your business. There are no “rules”. This blog is will give you a basic understanding of each type of pricing structure. You can then determine which one fits your services, your clients, and your business best.
So let’s break it down. In each section, we’ll look at how each pricing structure works, and discuss the pros and cons of each type. I’ll even offer suggestions about what type of services work well with each type of structure.
Hourly pricing
Hourly pricing is when you charge your clients a predetermined hourly rate. Many Virtual Assistants bill for the hours they’ve worked at the end of the month, but I don’t teach or recommend that practice. You should always get paid up front for your work. If you want to be paid hourly, estimate the time that it is going to take you to complete the task(s) and invoice a certain amount of hours up front, and bill them for any additional hours used after you have completed the task, or at the end of the month. If you’re wondering what you should be charging, check out this blog on that topic here.
Pros of hourly pricing:
- Hourly pricing allows you to be paid for exactly the number of hours you work, with very few exceptions.
- If you have a task that varies in volume each month, hourly pricing allows a flexible way for the client to pay you.
- Hourly pricing works well for tasks where there is difficulty determining the amount of time a task will take. It also protects you from underestimating the time you’ll spend.
- Hourly pricing works well for a predetermined number of flexible hours to complete various admin tasks. This may be a perceived as a benefit to some clients.
Cons of hourly pricing:
- Hourly pricing makes it hard to predict your monthly income, because each client is billed a different amount each month.
- You have to track your time and often create custom invoices for each client each month, effectively lowering your hourly wage.
- Client’s will try to micromanage your time or questioning time spent on tasks.
- You will make less when you become faster and better at your job because you are paid based on hours worked, not work completed.
- Hourly pricing makes it difficult to grow and scale, because it does not accurately reflect the value you are providing to the client. It only measures time spent, and not the value of the service.
Package Pricing
Package pricing is where a client pays a predetermined rate for a specific task, regardless of how long that task takes you. This works really well for most services and allows you to separate your proposals into separate fixed rates for each individual task. It is still totally appropriate for you to use an internal hourly rate to determine your package pricing, but you will charge the client one fixed amount.
For example, you might have an internal rate for social media management of $30/hour. You estimate that you’ll spend 20 hours a month for this client, so you charge a package price of $600/month. In the same contract, a client has you creating sales copy for their website, which is an advanced skill, and your internal rate for that service is $50/hour. You estimate that you’ll spend 10 hours a month on this task, and so your package rate is $500/month. The client does NOT see your internal hourly rate, nor your time estimates. In this example, for those two tasks, your total monthly rate would be $1,100 for this client.
Pros of package pricing:
- Allows you to charge appropriately for advanced skills.
- Allows you to charge different “rates” for tasks of varying complexity and skill. (for example, you could charge a lower fixed amount for inbox management, but a higher fixed amount for email marketing management – all within the same contract)
- Rewards you for getting better and faster at your job
- Eliminates the need for time tracking
- Reduces client micro-management
- Monthly invoices remain the same
- Allows you to accurately predict your monthly income
Cons of package pricing:
- If a task takes longer than anticipated, you could lose money if you don’t protect yourself adequately in the contract.
A Word on Project Rate Pricing
Project pricing is a special type of pricing used to charge for tasks that are limited in nature. The project rate is calculated as a fixed amount, charged once, for a specific job.
For example, project pricing works well for setting up social media accounts for the first time, cleaning up old accounts, spreadsheet creation, etc. When you first start working with a new client, you may be able to identify tasks that they need done that would fall under the umbrella of a one-time project.
Typically, you can calculate a project rate based on how long you estimate the one-time task will take you, the level of skill involved in the task, or a combination of the two. If you are unsure of how long a project will take you, include a clause inside your proposal and contract. This provides a safety net for you to potentially bill for additional hours.
For example: “If this project exceeds 20 hours, the client will be notified and then billed at a rate of $X per hour.”
Putting It All Together
When you are preparing a proposal for services, think of these three types of pricing – hourly, package, and pricing – as a mix and match situation. You do NOT need to choose one or the other for your proposal. Here are some questions to ask yourself, and some possible solutions:
Is this a recurring task where I can accurately estimate the time commitment each month?
Consider a package price for this service.
Is this a recurring task where the time estimate will vary each month?
Consider a base package price with flex hours (Example: 10 hours a month @$350.00, with up to 5 additional hours as needed, billed at $30/hour).
Does the client want a variety of admin tasks performed with no way to gauge the time commitment?
Consider billing the client hourly (or in an hourly package) until you are able to identify patterns. Then identify how long tasks will take and transition to a package price.
Does the client need a recurring service, but also need a bunch of additional one-time tasks completed before work can begin? (Examples: setting up or cleaning up old social media accounts, one-time organization of inbox, setting up systems, etc.)
Consider a package price for the recurring service, and a one time project rate for the one-time tasks. Unsure of how long a one-time task will take? Propose a base project rate, with an hourly rate for additional hours spent.
Setting your pricing structure is not an exact science. You may choose one type of pricing, only to find out that it doesn’t work well for you or your client.
Guess what? This is your business, and you can always decide to move away from pricing structures that are no longer serving you and your business growth.
If you want an in-depth look into pricing your services – snag my training HOW TO PRICE YOUR SERVICES!
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